Laws & Guidance HIGHER EDUCATION
1998 Amendments to the Higher Education Act of 1965
P.L. 105-244

TITLE IV--STUDENT ASSISTANCE

Part B--Federal Family Education Loan Program

SEC. 433. SPECIAL ALLOWANCES

(a) DEDUCTION FROM INTEREST AND SPECIAL ALLOWANCE SUBSIDIES- Paragraph (1) of section 438(c) (20 U.S.C. 1087-1) is amended to read as follows:

`(1) DEDUCTION FROM INTEREST AND SPECIAL ALLOWANCE SUBSIDIES- (A) Notwithstanding subsection (b), the Secretary shall collect the amount the lender is authorized to charge as an origination fee in accordance with paragraph (2) of this subsection--

`(i) by reducing the total amount of interest and special allowance payable under section 428(a)(3)(A) and subsection (b) of this section, respectively, to any holder; or

`(ii) directly from the holder of the loan, if the lender fails or is not required to bill the Secretary for interest and special allowance or withdraws from the program with unpaid loan origination fees.

`(B) If the Secretary collects the origination fee under this subsection through the reduction of interest and special allowance, and the total amount of interest and special allowance payable under section 428(a)(3)(A) and subsection (b) of this section, respectively, is less than the amount the lender was authorized to charge borrowers for origination fees in that quarter, the Secretary shall deduct the excess amount from the subsequent quarters' payments until the total amount has been deducted.'.

(b) ORIGINATION FEES- Section 438(c) is amended--

(1) in paragraph (2)--

(A) by striking `(other than' and inserting `(including loans made under section 428H, but excluding'; and

(B) by adding at the end the following new sentence: `Except as provided in paragraph (8), a lender that charges an origination fee under this paragraph shall assess the same fee to all student borrowers.'; and

(2) by adding at the end the following new paragraph:

`(8) EXCEPTION- Notwithstanding paragraph (2), a lender may assess a lesser origination fee for a borrower demonstrating greater financial need as determined by such borrower's adjusted gross family income.'.

(c) COLLECTION OF FEES- Paragraph (1) of section 438(d) is amended to read as follows:

`(1) DEDUCTION FROM INTEREST AND SPECIAL ALLOWANCE SUBSIDIES-

`(A) IN GENERAL- Notwithstanding subsection (b), the Secretary shall collect a loan fee in an amount determined in accordance with paragraph (2)--

`(i) by reducing the total amount of interest and special allowance payable under section 428(a)(3)(A) and subsection (b), respectively, to any holder of a loan; or

`(ii) directly from the holder of the loan, if the lender--

`(I) fails or is not required to bill the Secretary for interest and special allowance payments; or

`(II) withdraws from the program with unpaid loan fees.

`(B) SPECIAL RULE- If the Secretary collects loan fees under this subsection through the reduction of interest and special allowance payments, and the total amount of interest and special allowance payable under section 428(a)(3)(A) and subsection (b), respectively, is less than the amount of such loan fees, then the Secretary shall deduct the amount of the loan fee balance from the amount of interest and special allowance payments that would otherwise be payable, in subsequent quarterly increments until the balance has been deducted.'.

(d) LENDING FROM PROCEEDS OF TAX-EXEMPT OBLIGATIONS-

(1) AMENDMENT- Subsection (e) of section 438 is amended to read as follows:

`(e) NONDISCRIMINATION- In order for the holders of loans which were made or purchased with funds obtained by the holder from an Authority issuing obligations, the income from which is exempt from taxation under the Internal Revenue Code of 1986, to be eligible to receive a special allowance under subsection (b)(2) on any such loans, the Authority shall not engage in any pattern or practice which results in a denial of a borrower's access to loans under this part because of the borrower's race, sex, color, religion, national origin, age, disability status, income, attendance at a particular eligible institution within the area served by the Authority, length of the borrower's educational program, or the borrower's academic year in school.'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall be effective as of the date the plan required by section 438(e)(1) (as such section was in effect prior to such amendment) was approved by the Secretary or the Governor (whichever was the case). No Authority shall have a right or cause of action against the Secretary for any amounts paid to or offset by the Secretary pursuant to a final settlement agreement entered into prior to July 1, 1998, resolving any audit or program review findings alleging violations of any provision of section 438(e) (as in effect prior to such amendment).

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Last Modified: 09/24/2003